Get timely and tactical advice for how manufacturers can wield their existing SAP systems to navigate short-term challenges while preparing for success in the eventual economic upturn.

It’s no secret that the current economic downturn has hit manufacturing particularly hard. Given increased demand-side and supply-side volatility and heightened uncertainty about the near-term future, global manufacturers are being forced to revisit fundamental questions about how they run their business, from strategy through execution. Key issues include:

How should we execute across our vast network of suppliers and partners to ensure speedy responses to dramatic demand changes and capacity declines?

Can we further drive down costs across internal production operations without compromising quality and efficiency?

How do we reduce, redeploy, and optimize our assets? What short-term and long-term strategies can we put in place now to ensure a competitive advantage?

For manufacturers to alleviate the economy’s severe impact, they can’t just optimize one of these areas at the expense of the others. They must address the entire process of manufacturing-related activity in a way that delivers measurable business value. Short-term process improvement efforts must not only align with strategic initiatives, they must also provide fast results.

Against this backdrop, responses to each of the questions raised above hinge on two critical factors. One, does the manufacturer have complete visibility into what’s happening across its manufacturing operations? And two, can the manufacturer orchestrate appropriate action through integrated business and manufacturing processes to ensure that it is optimally meeting customer demand, adhering to quality standards and regulations, minimizing costs and waste, and simultaneously not overlooking any emerging market opportunities?

In this article, we’ll offer timely and tactical advice for how manufacturers can wield their existing SAP systems to navigate these issues while preparing for success in the eventual economic upturn. We’ll also highlight new manufacturing capabilities, available with SAP Business Suite 7, that support this effort. We’ll start by taking a fresh, process-based look at the “perfect plant” framework. We’ll then discuss three areas of process improvement that, given the right focus, can not only provide the best outcome for manufacturers in today’s economic environment, but also deliver sustained manufacturing excellence for decades to come.

A New Look at the Perfect Plant

In a previous SAP Insider article, we defined a framework of the perfect plant, which helps organizations transform their manufacturing operations strategy to anticipate change, improve flexibility, optimize assets, and operate in a high-intensity, demand-driven environment without compromising service or increasing costs.1 As part of this framework, we’ve described core functional capabilities in planning, execution, asset management, and visibility as main drivers (see sidebar).

Now, we will evolve the framework to integrate these core capabilities into business processes that will bring your perfect plant strategy to life. Expanding the perfect plant framework to include a broader process view provides two important benefits:

You can focus your efforts on only the business processes that are most relevant to achieving your corporate objectives.

You can prioritize your functional deployments to support the objectives of those business processes.

Note that each process — three of which we’ll highlight in the following sections — crosses over different functional areas of the business, including supply chain, design, and procurement. Processes also use key functional capabilities in SAP Supply Chain Management, SAP Manufacturing, and SAP ERP as underpinnings. Using this process-focused perspective, SAP customers can continue to get more leverage from their existing implementations in SAP solutions even as they deploy additional SAP capabilities.

Pursuing the Perfect Plant

To meet today’s demanding paradigm of “design anywhere, manufacture anywhere, and deliver anywhere,” manufacturers must drive production performance to directly align with operational metrics and corporate strategy. IT plays an important role as a key enabler in tightly integrating manufacturing execution with business workflows.

To achieve these objectives, what’s needed is a holistic transformation of manufacturing operations. The transformation should be uniquely tailored to supporting your end objectives, or your “perfect plant,” enabling you to take a measured approach to improve key performance metrics around customer delivery, quality, and costs (see figure below).

The perfect plant is an end goal — an idealistic vision that helps an organization keep its manufacturing strategy directly in line with its corporate objectives. The pursuit of the perfect plant empowers plant personnel, operations, and IT to collectively design, prioritize, and implement strategies that impact core elements of production planning, intelligence, and integration. The perfect plant framework helps organizations drive manufacturing to prioritize on the following metrics:

Optimizing return on assets: How do you measure overall equipment effectiveness and ensure you are generating a sufficient rate of return?

Meeting customer delivery targets: How do you increase your visibility into scheduling and capacity requirements? How do you improve cycle times and guarantee supplier performance? And how do you compensate if suppliers fail to perform?

Minimizing operating costs: How do you measure overall production performance and create processes that can be continually improved?

Meeting quality and compliance standards: How do you minimize waste, measure and hit quality targets, and have processes in place to ensure that operations comply with regulatory standards?

The Manufacturing Network Planning and Execution Process

In today’s complex networked manufacturing environment, manufacturers must transform their expansive network of internal and external plants, suppliers, outsourcers, and trading partners to act as a single, virtual, global plant floor. Companies need to be able to continuously coordinate across their network yet still include effective local planning and execution to quickly adjust to demand and supply volatility.

To do so effectively, planning and execution must extend beyond traditional boundaries and be fused together with upstream and downstream value- chain activities. To support manufacturers in this endeavor, SAP offers integrated, end-to-end business processes that provide complete visibility into operational demand, supply, and production dynamics and convert visibility into precise action to continuously update network-wide production planning and execution.

The preintegrated “manufacturing network planning and execution” process from SAP includes the following process steps (see Figure 1):

Manufacturing network planning ensures a single, detailed, actionable plan that combines demand and supply activities across the supply network to minimize lead times across internal and external plants, products, and suppliers.

Production planning and execution supports the detailed scheduling and on-demand execution of the production plan across plants to reduce stock-outs, overall work in process, and finished goods or material inventory both within individual plans and across the overall network.

Outsourced manufacturing ensures that providers and the execution status of their work orders and inventory are coordinated into production plans.

Material supply and replenishment establishes a continuous flow of raw materials to ensure production execution across the value chain — specifically to ensure component inventory and supplier-managed inventory optimization.

SAP Business Suite 7 offers new functionality to help manufacturers better manage and coordinate their network planning and execution. To improve collaboration and communication with outsourced suppliers and increase the effectiveness and efficiency of end-to-end outsourced manufacturing processes, the suite includes PO management, batch traceability, supplier self-service, and product configuration capabilities, among others.

The Plant-Specific Manufacturing Planning and Execution Process

A key impediment of effective production execution within internal plants is the widespread existence of disconnected enterprise and plant-specific manufacturing systems, creating an inefficient environment that is expensive to maintain and difficult to integrate. System silos across plants and enterprise layers also make it more challenging to have transparent manufacturing operations to drive optimal production.

To turn this challenge into a competitive advantage, manufacturers must align core operational business processes like enterprise planning and control with plant-specific production processes such as scheduling and execution. SAP delivers an integrated business process that spans enterprise and plant-specific production planning and execution activities to ensure that manufacturers can drive demand-driven production without building up excess inventory or violating quality and conformance issues.

Capacity planning and control ensures that relevant information from the network-wide manufacturing plan is visible to local manufacturing facilities in an actionable context. This includes key aspects of finished goods planning and multi-plant capacity plans, as well as tight integration into quality, compliance, and traceability requirements.

Plant-level operations focuses on a localized plan and schedule that ensures the most effective use of local resources, assets, and materials to minimize work in process and meet local delivery targets. In lean environments, this step includes Kanban lot sizing and demand leveling.

Plant-specific manufacturing execution focuses on detailed production execution and effectively integrates work instructions with machines and automation systems to carry out the actual production. This step also provides the most granular information on production performance, status, quality, and genealogy (see sidebar).

The wide range of new functionality in SAP Business Suite 7 helps manufacturers achieve closed-loop production and execution processes for efficient operations. For example, enhanced production order split functionality enables fair-cost split between parent and child orders, allowing meaningful comparison of planned and actual costs.

Deep Capability in Manufacturing Execution

Acquired in 2008 from Visiprise, SAP Manufacturing Execution is a robust business application that enables global manufacturers to manage and control manufacturing and connect it to the rest of the enterprise. The application is integrated with numerous SAP ERP processes via a powerful SAP Manufacturing Integration and Intelligence (SAP MII) connector; these integrated processes ensure tight connectivity between the manufacturing-level and business systems, enabling real-time order and work in process (WIP) tracking, full supply chain traceability, and closed-loop quality and compliance processes. SAP Manufacturing Execution also works in non-SAP environments and in situations where SAP ERP may be disconnected from the shop floor for a period of time (such as during patch applications or system upgrades).

SAP Manufacturing Execution ensures that products are built right the first time; it collects data from multiple sources and integrates data systems with shop-floor activities to create a single, comprehensive, as-built record. The result is an aggregate record of the entire product history, stored and available for timely and key decision making around containing costs and meeting quality and compliance requirements.

The Asset Visibility and Performance Process

For most asset-intensive industries, improving asset performance is often deemed a critical strategic imperative to improve ROI and respond to customer demand for improved quality and shorter lead times. Especially relevant for today’s economic climate, companies need to reduce capacity and assets to save costs, yet ensure optimal performance out of assets that are still operational. A marginal improvement in asset yield can have a significant impact on operating margins and productivity.

Companies can lower costs and increase asset utilization and performance only through a proactive asset management strategy and deep visibility into asset usage. To achieve this, SAP delivers end-to-end processes that offer a unified, synchronized approach to integrating operations and maintenance processes for assets across your organization.

Designing an asset management strategy and setting up KPIs enables manufacturers to set up asset management, maintenance strategies, and improvement programs with defined goals and objectives.

Measuring operating performance includes setting up performance and measurement tools to view asset utilization, machine or line failures, quality results, order status, and safety metrics in line with defined objectives.

Asset visibility and performance enables manufacturers to set up plant dashboards and act on alerts, conduct improvement programs, and optimize maintenance and plant operations to maximize profitability

Visibility: A Centerpiece for Successful Business Process Execution

A manufacturing company can deploy all the right processes and capabilities across planning, execution, and asset management, but without clear visibility into operations, plant managers and line operators could still be making decisions based on faulty data and inconsistent information.

Some manufacturers have opted to implement manual processes and various point solutions — such as spreadsheets, databases, or niche vendor applications — to control, execute, and analyze their operations. These data silos are neither connected nor readily available to the rest of the company’s business solutions. Knitting these siloed solutions together would be expensive and would require tremendous maintenance. This lack of integration and absence of real-time connection to the business results in clouded visibility, causing operational inefficiencies and decisions that are made based on theory, not facts.

What manufacturers need is a comprehensive solution that can help them better control, execute, and analyze operations to reduce costs and improve quality. They also need the ability to quickly and cost-effectively connect real-time operations, in a single environment, for enterprise visibility into what’s happening in manufacturing.

SAP solutions are equipped to provide manufacturers with complete visibility to help manage and control operations and resources — from planning to execution. With simplified and personalized access to key information, manufacturing staff can make decisions and take actions more quickly.

SAP Business Suite 7, for example, includes a new manufacturing dashboard for production supervisors. Within this dashboard, shop-floor managers can see an overview of pending work orders, production confirmations, the supply/demand situation, or any delays, giving them fast, easy access to the relevant information needed to make key business decisions.

A Quick Start to Long-Term Value: Best-Run Now

In the current economic environment, the right manufacturing solutions are essential to help companies manage cash, drive efficiency, optimize assets, and reduce costs. That’s why SAP is offering Best-Run Now solution packages, modular installments of SAP Business Suite 7 functionality combined with special financing and global SAP and partner services to support rapid deployment.

The SAP Manufacturing Integration and Intelligence package, for example, provides organizations complete visibility into real-time, plant-floor operations and enterprise supply and demand dynamics. This helps manufacturers rapidly adjust production execution to match demand changes, lower production costs by using assets more efficiently, and provide mission-critical information to support lean, quality, and compliance requirements.

What’s more, the package serves as a key foundation for extending processes as manufacturers improve in the long term, ensuring that investing in the package is more than a short-term fix; it’s a strategic, long-term investment.

Conclusion

With the vision of the perfect plant, SAP has defined a framework though which manufacturers can transform their operations strategy to anticipate change, improve flexibility, optimize assets, and operate in a high-intensity, demand-driven environment — without compromising service or increasing costs.

Now, we’ve evolved the framework so that companies can integrate these perfect plant ideals into their day-to-day business processes. By improving your business across three process areas — network-wide planning, plant-specific execution, and asset performance — and then tying it all together with clear visibility into operations, manufacturers can not only weather the current economic storm, but sustain excellence in the long term.

Additional Resources

“Establish Your Product and Service Leadership” by Thomas Ohnemus, which describes a supporting value scenario — integrated product development — that is also linked to the perfect plant framework (SAP Insider, April-June 2009, www.SAPinsideronline.com)

Vivek Bapat (vivek.bapat@sap.com) is the Vice President of Suite Solutions Marketing for manufacturing, supply chain, and product lifecycle management solutions at SAP. He is the
co-author of two books, The Pursuit of the Perfect Plant (2008) and Call Center Modeling and Simulation (1997), and has contributed to eight globally recognized RFID patents. Vivek holds a bachelor’s degree in mechanical engineering, a master’s degree in industrial engineering, and an MBA.

Kara Glencross (kara.glencross@sap.com) is the Director of Manufacturing Solutions Marketing at SAP. She is responsible for Perfect Plant marketing and coordinating global marketing plans to deliver focused thought leadership and demand generation. Prior to working at SAP, Kara was the Vice President of Global Marketing at Visiprise. She earned a bachelor’s degree in business management at Clemson University.

1 See “In Pursuit of the Perfect Plant,” a Business Process Excellence article in the January-March 2008 issue of SAP Insider (www.SAPinsideronline.com). [back]

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